Big Oil and the anti-ESG movement accuse banks of running ‘climate cartels’.
Big Oil and the anti-ESG movement accuse banks of running 'climate cartels'.
Climate Alliances: Building a Sustainable Future
Funded by the fossil fuel lobby, some Republicans are taking aim at climate alliances, like the Glasgow Financial Alliance for Net Zero (GFANZ) and Climate Action 100+, for allegedly violating antitrust laws. Although these threats have apparently led to several defections from the GFANZ insurance alliance, the claims are political theater: climate alliances like these are permissible under U.S. antitrust law.
Climate change is a pressing global issue, and addressing it requires collective action across industries and countries. In response to this urgent need, organizations like the Glasgow Financial Alliance for Net Zero (GFANZ) and Climate Action 100+ have emerged as key players in accelerating decarbonization and combating the climate crisis.
GFANZ is a global coalition of leading financial institutions committed to aligning their activities with the goals of the Paris Agreement. Through information sharing, voluntary standard setting, and other collaborative activities, GFANZ aims to drive the transition to a low-carbon economy. It is important to note that such alliances are not uncommon, as voluntary industry standard-setting and trade associations have long been permissible under U.S. antitrust laws. The Federal Trade Commission (FTC) and Department of Justice (DOJ) even provide guidelines to support these practices, distinguishing between pro-competitive behaviors and antitrust violations.
The notion of antitrust violations typically arises when competitors collude to set prices or restrict production, known as horizontal collusion. It is crucial to differentiate between a corporate boycott and a consumer boycott or protest movement. A corporate boycott is a specific type of agreement among competitors to take joint action against another competitor, with anti-competitive intent. In the case of climate alliances like GFANZ, financial institutions do not compete with the companies they finance, and they autonomously establish and implement their climate goals. Despite accusations, no antitrust cases have been filed against these alliances.
The attacks on climate alliances are driven by climate deniers
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These attacks on climate alliances are part of a broader movement known as “anti-woke capitalism.” Funded by fossil fuel lobbying groups and climate denial think tanks, this movement aims to undermine environmental, social, and governance (ESG) strategies in the financial industry. Over a hundred anti-ESG bills have been introduced, targeting asset managers, pension funds, banks, and other financial institutions that consider ESG risks in investment decisions. However, such bills have faced pushback from banking associations, investors, and business groups, with many failing to pass. These bills have the potential to cost taxpayers and pensioners hundreds of millions of dollars.
Some Congressional Republicans and Republican attorneys general are also challenging financial institutions’ ESG practices through investigations. These investigations involve issuing subpoenas to shareholder groups and raising concerns about potential violations of fiduciary duties and consumer protection laws. The goal of these actions is to hinder efforts to address the financial risks of climate change by weaponizing consumer protection laws.
The consumers that politicians claim to be protecting want renewables
The risks posed by climate change are undeniable, and they have significant financial implications. Failure to address climate change could result in a 20% reduction in global GDP by 2050, along with substantial economic losses due to climate and weather disasters. The bankruptcies of major companies like PG&E and Peabody Energy serve as stark reminders of the financial impacts tied to climate change.
The public is increasingly aware of these risks and supports action to address them. A Pew Research poll revealed that 69% of U.S. adults prioritize developing alternative energy sources like wind and solar over expanding fossil fuel production. Similarly, roughly the same percentage of respondents believe that large businesses and corporations are not doing enough to combat climate change. This sentiment aligns with the scientific consensus that no new fossil fuel plants should be built if we are to avoid the worst impacts of climate change, as highlighted by the International Energy Agency.
While politicians may celebrate the unraveling of climate-aligned alliances, insurers are grappling with mounting financial losses from climate-related extreme weather events. State Farm, for instance, the largest homeowners insurance company in California, announced that it would no longer offer coverage to new homeowners across the entire state due to the escalating financial risks associated with wildfires and natural disasters.
Despite attempts to attack climate-aligned investing, the financial sector plays a critical role in facilitating a safe and rapid transition to a clean energy economy, as well as in mitigating the substantial financial risks posed by climate change. The claims of antitrust violations against climate alliances are unfounded. Unfortunately, American taxpayers may bear the cost of this misguided opposition.
Authors: Cynthia Hanawalt, Senior Fellow at the Sabin Center for Climate Change Law, and Denise Hearn, Senior Fellow at the Columbia Center on Sustainable Investment and co-author of The Myth of Capitalism: Monopolies and the Death of Competition. The authors co-lead the Antitrust & Sustainability Project at Columbia Law School and Columbia Climate School.
